Tornado Cash Trial Pulls Dragonfly Into Legal Crosshairs

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Tornado Cash Trial Pulls Dragonfly Into Legal Crosshairs

Written by Aaron S.,

Editor-In-Chief

Last Updated: July 28, 2025

Key Takeaways

DOJ is considering charges against Tom Schmidt and others at Dragonfly over a 2020 investment tied to Tornado Cash;
Dragonfly says it cooperated fully with the DOJ and denies any wrongdoing, calling the claims baseless;
Schmidt refused to testify in court, while emails show Tornado Cash developers asked Dragonfly for KYC guidance.

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Tornado Cash Trial Pulls Dragonfly Into Legal Crosshairs

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Federal prosecutors are looking into possible charges against Tom Schmidt of Dragonfly Capital and some of his colleagues, according to Assistant US Attorney Thane Rehn.

The update came during the ongoing criminal trial of Tornado Cash developer Roman Storm in New York.

Schmidt and his team backed Pepper Sec Inc., a company linked to Tornado Cash, in 2020. The Department of Justice (DOJ) later sent a subpoena to Dragonfly in 2023 as part of its investigation.

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In response, Dragonfly co-founder Haseeb Qureshi stated that the firm had followed all laws and fully cooperated.

He added that the company does not believe the DOJ will move forward with what he described as "absurd and groundless charges". He also said they are ready to defend themselves if needed.

Storm’s legal team had planned to call Schmidt as a witness, but Schmidt declined to answer questions in court by invoking his right not to incriminate himself. It is not yet clear whether he will be required to speak in court at a later time.

Prosecutors stated that Storm and his partners contacted Dragonfly leadership, including Qureshi and Schmidt, through email.

In one message, they requested advice on incorporating know-your-customer (KYC) features, which are designed to verify users’ identities in accordance with US regulations.

On July 23, prosecutors called IRS Special Agent Stephan George to testify in the Tornado Cash trial. What did he say? Read the full story.